The Delhi bench of the Income Tax Appellate Tribunal, in a recent decision observed that if the Tribunal found that there is no material on record to prove the ‘concealment of income’ by the assessee, then such finding is final and the Department cannot proceed with the penalty imposition under section 271(1)(c) of the Income Tax Act, 1961. The ruling was based on the decision of Supreme Court in K.C. Builders case.
The assessee in the instant case,is a 100% export oriented unit into the manufacturing and export of plain gold jewellery and has been claiming deduction u/s 10A / 10B of the Act.The assessing officer completed assessment and initiated penalty proceedings against the assessee on ground that the assessee has made a deliberate attempt to conceal his taxable income by furnishing inaccurate particulars and inflating the claim of deduction u/s 10A /10B the Officer observed that the assessee had claimed more than lawful deduction and further claiming interest on the business income whereas it was not business income.Both the assessment and penalty orders were confirmed by the Commissioner of Income Tax (Appeals). Assessee approached the Tribunal through appeal.
On behalf of the assessee, it was contended that the penalty order is unsustainable before law since the addition of Rs.11,41,714/- made by the AO vide order dated 15.12.2006 qua AY 2004-05 stands already deleted by the Tribunal in case cited as M/s. Royal Exports vs. ACIT in ITA No.2402/Del/2008. The respondents on the other hand, took a stand that the penalty proceedings are not to be influenced by the quantum proceedings.
These being the facts, the sole question before the Tribunal was to decide whether penalty imposed under section 271(1)(c) of the Act on the basis of addition made by the AO is sustainable when addition has already been deleted by the Appellate Tribunal?
The Tribunal noticed the decision of the Supreme Court in K.C. Builders v. Assistant Commissioner of Income-tax 265 ITR 562 (SC), in which the Court by reversing the decision of the High Court, held that “the finding of the Appellate Tribunal was conclusive and the prosecution could not be sustained since the penalty was cancelled following the Tribunal’s order and no offence survived under the Income-tax Act thereafter. Quashing of the prosecution was automatic. Allowing the trial to proceed further would be an idle and empty formality”.
Following the above dictum of the Supreme Court, the Tribunal quashed the penalty order and held that “So, when he Appellate Tribunal came to the conclusion that there is no material on record to sustain the addition, there is no question of concealment of income by the assessee to attract the provisions contained u/s 271(1)(c) of the Act.”
Read the full text of the Judgment below.